Less tax for those who build, renovate and let. The largest real estate tax-relief package in years is now in force. Decree-Law No. 97/2026 of 20 May approves a set of measures to stimulate housing supply, with effect until 31 December 2029. Here is what matters — and what to confirm before deciding.
1. Construction and renovation VAT at 6%
The flagship measure: the VAT rate on housing construction and renovation falls from 23% to 6%, provided the property is intended for sale at a moderate value (up to around €660,982) or for letting at a rent up to €2,300 per month. The reduction covers works started from September 2025, which calls for rigour in dating and contractually framing the works.
2. Capital-gains exclusion with reinvestment in rental housing
Real estate capital gains become excluded from income tax (IRS) where the proceeds are reinvested in property intended for residential letting. This is a significant novelty for those looking to redirect real estate capital into rental supply without the usual tax bill.
3. Higher income-tax deduction for tenants
The annual limit for deducting rent paid by tenants rises progressively — up to €900 in 2026 and €1,000 from 2027.
4. Affordable letting with a tax benefit
Incentives for letting at moderate rents (below the municipal median) are reinforced, with lighter taxation of rental income for landlords who charge affordable values. For the investor, the framework now rewards placing property in the long-term rental market.
Before investing or building, confirm the framework
Each benefit has its own requirements, limits and deadlines, and misclassifying an operation can cost the tax advantage. Reading the statute, the contract and the works schedule together is what ensures the benefit actually applies to your case.
Are you building, renovating or investing in rental housing? Paulo Silva Silva, Lawyer, structures real estate operations and their tax framework, working alongside your accountant. Book a meeting or contact paulosilvasilva.adv@gmail.com · 916 055 901.
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The information in this article is general and institutional in nature; it does not constitute legal advice and does not create a client relationship. Decree-Law No. 97/2026 should be confirmed in its version in force in the Diário da República (dre.pt) before any decision.